Thursday, June 20, 2013

Greased Rails for Oil and Coal

PHOTO: Globe and Mail/Canadian Pacific
Some of us remember the Arab Oil Embargo of 1973-74 when the foreign oil we depend on was cut back, resulting in cars lining up for gas and higher prices at the pump. The embargo also prompted a law outlawing export of our domestic oil to foreign countries. There have been several incidences since then of threats to our life styles due to dependence on foreign oil imports, prompting many words about the necessity of U.S. achieving energy independence.

Well, thanks to fracking technology advances, domestic oil production may outstrip refinery capacity within 18 months to three years, according to an analyst at FBR Capital Markets Corp. Net petroleum imports now account for about 40 percent of demand, down from 60 percent in 2005, according to the U.S. Energy Information Administration, the Energy Department research unit. Output is putting the nation on pace to surpass Saudi Arabia as the world’s largest producer by 2020, according to Energy Department data.

In order to maintain the growth in domestic oil production despite the limits of refinery capacity, the law prohibiting export of domestic oil may have to be lifted by Congress. ( U.S. Considers Exporting More Oil for First Time Since ’70s  )

This puts Burlington Northern Santa Fe Railway, already in prime position to profit from transporting coal to be exported from facilities proposed in Washington and Oregon, in an equally prime position to profit from transporting oil to be exported— should the oil export ban be lifted.

The rail lines are already in place and BNSF since last year has been supplying the Tesoro refinery near Anacortes with a third of its crude oil from the Bakken oil fields in Montana and North Dakota. You might have seen those 100-car shipments on their way to Anacortes; we can expect to see many more when Bakken crude oil deliveries by rail begin to the Phillips and Shell refineries as well as to the BP refinery in Ferndale, which currently receives Bakken crude oil via barge from a Clatskanie, Oregon, terminal until its refinery rail line is completed.

Pipelines like BC’s Northern Gateway to carry Alberta tar sands oil and Kinder Morgan to carry Canadian Bakken crude and the yet-to-be-approved Keystone pipeline are all still in play, but the oil transport games changed rapidly in the last year.

America’s energy boom has left the middle of the country awash in cheap oil. But as pipeline companies scramble to spend billions of dollars to build new pipes to tap these hot new fields, they’re discovering that railroads have beaten them to the punch. By laying a few extra miles of track and building new loading facilities, oil and gas operators are quickly connecting remote areas of oil production with the existing networks of big railroads such as Union Pacific and BNSF Railway. On the other end, they’re running tracks directly into refining complexes as far away as Philadelphia and Puget Sound. These rail projects can often be finished in a matter of months at a cost that’s usually in the millions, not billions.” Amid U.S. Oil Boom, Railroads Are Beating Pipelines in Crude Transport  
The Port of Grays Harbor which boasts itself to be “Washington’s only deep water port on the Pacific coast”, in hopeful anticipation of some boom times to come their way, dropped plans to develop a coal export facility and instead has been moving forward with a proposal to build a crude oil export facility served by rail.

Notwithstanding the Port’s declaration that the “oil industry is one of the most regulated industries. State and federal laws and policies will govern construction, operations and shipping protocols,” a coalition of Friends of Grays Harbor, Grays Harbor Audubon Society, Citizens for A Clean Harbor, Surfrider Foundation, and Sierra Club has concerns about putting nearly 100 million gallons of crude oil on the edge of the Grays Harbor Estuary. The coalition filed an appeal to the Substantial Development Permit granted to Westway Terminal Company, LLC by the City of Hoquiam and Department of Ecology. Citing failure to follow the law and errors in application of the law, the appeal asks the Shorelines Hearings Board to reverse the permit and the Mitigated Determination of Non-Significance and require an Environmental Impact Statement for the project. So has the Quinault Indian Nation.

According to Curt Hart at the Department of Ecology, the state has regulatory authority when oil is transferred over water, from land to ship or from ship to land. While the state cannot pre-empt federal laws and regulations governing shipping operations, contingency response plans for oil spills and equipment are required of transports over water. Washington state has a rescue tug at Neah Bay paid for by the shipping industry.

Not so for trains carrying oil or coal or your caustic chemical. As interstate commerce solely under federal regulations, railways don’t need to declare what they are carrying or when or where. Only after there is an accident must they declare their manifest to first responders. Each rail car of oil carries about 28,000 gallons; a spill in a rail yard is one thing; a spill along a waterway like the Columbia River or Puget Sound is another.

If the boom in oil and coal transport by rail is put into the equation of jobs vs. environment, constructive discussion tends to bog down, so I’d put the question in terms of asking who benefits from this boom in resource extraction and export and who or what is put at risk by this boom without benefit? It’s a rather selfish way of looking at what some might consider progress and others regress, but maybe by starting there, we can begin discussing how to share the benefits and the risks in an equitable way.

--Mike Sato


  1. I like your question, who benefits and who or what is put at risk? Unfortunately, a legal framework has been erected that prevents us from asking the second question.
    Lawyers for industry have pressured The Army Corps of Engineers to say on June 19, that they will not ask or answer the second question. We have become a colony.

    1. Back in late February 2013: The White House Council on Environmental Quality has convened a series of meetings with federal regulators over the past nine months as the Obama administration shapes environmental impact analyses for the building of terminals to export coal to Asia. While CEQ downplays its involvement in the deliberations, a former CEQ official and other analysts suggest the White House role highlights the sensitive policy issues at stake, as the administration is under pressure to assess the possible climate change impact of burning U.S. coal in Asia. At issue is how broadly the government should extend its analysis: whether to consider the impacts of each of the Pacific Northwest export terminals through narrowly tailored individual environmental impact statements or to assess their cumulative effects together, which would allow for a comprehensive analysis of possible climate change impacts. White House CEQ Meetings on Coal Projects Seen Indicating Major Policy Issues at Stake